PT Bank Buana Indonesia Tbk
PT Bank Buana Indonesia Tbk
Total Assets: IDR 13.28 billion ($1.49 billion)(2002)
Stock Exchanges: Jakarta
Ticker Symbol: BBIA
NAIC: 522110 Commercial Banking
PT Bank Buana Indonesia Tbk has come through the Asian economic crisis of the late 1990s in fine form. With a rising assets base and stable financial base, Bank Buana has achieved Class A certification from the Bank of Indonesia and has successfully converted into a publicly listed bank. One of Indonesia's top 20 banks, Bank Buana has traditionally focused on the trade finance segment, targeting especially small and mid-sized businesses. The retail distribution market is also a primary target of the group. Bank Buana offers a full range of retail and commercial banking services, including a range of savings products and e-banking services. The company's loans include working capital loans, export-import loans, bank guarantees, and investment loans. Bank Buana serves its market through nearly 150 locations throughout Indonesia, as well as through its eMobile Mbank online service. In 2002, the bank posted total assets of more than IDR 13.2 billion (approximately $1.5 billion).
Origins and Development: 1950s to Early 1990s
PT Bank Buana Indonesia was founded in 1956 as a private bank in Jakarta. The bank remained small, and by the early 1960s found it difficult to keep afloat. In 1965, the bank was bought up by a group of five Indonesian industrial companies, which each took an approximately equal share in Bank Buana. Among the bank's new owners were a producer of glass and a textile manufacture. Owning a bank for these modestly sized businesses was not merely for the prestige but was also a way of cutting back on their own banking charges. Yet the equal shareholder status of the five owners made it difficult to reach agreement over the bank's management policies and long-term strategy. This situation led the bank to adopt a highly conservative approach to growth and to focus its customer portfolio on the trade finance market, rather than on the consumer market.
Nonetheless, Bank Buana grew strongly in the 1970s. Mergers and acquisitions marked the group's expansion during this period, beginning with the 1972 merger with PT Bank Pembinaan Nasional, in Bandung. In 1974, Bank Buana expanded its operations again by absorbing PT Bank Kesejahteraan Masyaraka, in Semarang, and then again, in 1975, by merging with PT Bank Aman Makmur, based in Jakarta.
A turning point for Bank Buana came in 1976, when it was awarded a foreign exchange license—only about 20 percent of Indonesia's many banks were to achieve this status. As such, Bank Buana was able to develop into one of the country's leading foreign currency and trade finance specialists. The bank stepped up its growth through the 1980s, opening more than 100 branch offices throughout the country. By 1990, Bank Buana had become Indonesia's twelfth largest bank.
By the late 1980s, however, Bank Buana's five-way ownership structure, and the inability to reach consensus, had left the bank vulnerable in the buoyant Indonesian banking market. Starting in about 1989, the bank went into a period of relative stagnation; by 1994, it had slipped back to 35th place among the country's top 50 banks. As both its loan portfolio and assets base slipped back, the bank continued to lose ground in the booming Indonesian banking sector.
Fuelled by increasingly liberal government banking policies, the Indonesian economy, and its banking sector, grew quickly in the late 1980s and early 1990s. Bank Buana appeared to sit on the sidelines, while its competitors increasingly gained ground. By the early 1990s, Bank Buana seemed at a standstill in what some observers described as an "overbanked" Indonesian financial market.
Instead of growing its own business, Bank Buana concentrated on forming joint-ventures, partnering with foreign banks seeking entry into the fast-growing Indonesian market. As such, the group formed a joint-venture with Japan's Mitsubishi Bank, named PT Mitsubishi Buana Bank, in 1989. The following year, Bank Buana partnered with DBS Bank and TatLee Bank of Singapore to create DBS Buana TatLee Bank. DBS later took over Mitsubishi's stake in the former bank, which changed its name to DBS Buana Bank, then sold out its stake in the Buana-TatLee partnership, which became Keppel TatLee Buana Bank.
Restructured for Growth in the New Century
The year 1994 marked a significant change for Bank Buana. In that year, the company changed its shareholder structure, placing more than 89 percent of its shares into a newly created holding company, PT Sari Dasa Karsa. At the same time, the bank installed a new management team, which began a more aggressive growth policy. The bank's new management specifically targeted expansion of the bank's loan policy, which grew by some 40 percent into the middle of the decade.
In the second half of the 1990s, Bank Buana's new growth drive had returned it to Indonesia's top 20 banks. However, concerns that the bank was now expanding too fast led management to scale back its growth. Although analysts consistently referred to the group's management strategy as conservative, Bank Buana itself favored "prudent" as a more descriptive term for its strategy. Nonetheless, Bank Buana began preparing for an initial public offering, initially slated for 1997.
The crash of Indonesia's financial community—amid the economic crisis that swept through Asian markets in the late 1990s—put a temporary halt to the group's plans for a stock listing. As the Indonesian banking sector reeled from the sudden collapse of the country's economy, and as many of Bank Buana's competitors slipped into bankruptcy, Bank Buana's more conservative approach enabled it to emerge relatively unscathed from the crisis. Indeed, when the Bank of Indonesia reviewed Bank Buana, it became one of few to receive certification as a Class A financial institution.
Bank Buana once again began preparations for its public listing at the end of the 1990s. As part of that process, the bank sold off its share of the DBS Buana joint-venture. Bank Buana went public in July 2000, listing on the Jakarta and Surubaya Stock Exchanges in a successful offering that was several times over-subscribed. The bank continued expanding its shareholder base, adding two new major shareholders in the early 2000s, including PT Makindo Tbk, which boosted its stake in the bank to 6.92 percent in 2002.
Bank Buana split its stock for the first time, in a 2-for-1 split, near the end of 2002. Soon after, Bank Buana was admitted to the New York Stock Exchange as well, where its shares began trading as American Depositary Receipts (ADRs). In April 2003, the International Finance Corporation, a subsidiary of the World Bank, acquired nearly 7 percent of the bank, underscoring Bank Buana's status as one of the country's most stable smaller banks. That purchase reduced PT Sari Dasa Karsa's stake in the bank to just over 55 percent.
From the very beginning, we have always concentrated our business on catering to the needs of our retail customers, distributors as well as small to medium sized enterprises. These sectors have been proven to endure, even during the most difficult economic periods. Our full commitment to these sectors has paid off as it has allowed us to weather the economic crisis in 1997 and enabled us to achieve a sustainable growth. We will continue to expand our network of offices, human resources, and information technology to reach our mission: to be the most reliable, trusted, and sound bank in the nation in serving small to medium scale businesses.
- PT Bank Buana Indonesia is established in Jakarta.
- Bank Buana is acquired by a partnership formed by five industrial companies.
- The bank merges with PT Bank Pembinaan Nasional, in Bandung.
- PT Bank Kesejahteraan Masyaraka, in Semarang, is acquired.
- The bank merges with PT Bank Aman Makmur, based in Jakarta.
- Bank Buana is granted a foreign currency license.
- The bank forms a joint-venture with Japan's Mitsubishi Bank, PT Mitsubishi Buana Bank (later PT DBS Buana Bank).
- A joint-venture is formed with DBS and TatLee, PT DBS TatLee Buana Bank.
- A new holding company is created, PT Sari Dasa Karsa, which acquires nearly 90 percent of Bank Buana's shares and installs new management.
- The bank receives class A certification from Bank of Indonesia and sells out its share of DBS Buana Bank.
- Bank Buana goes public with a listing on the Jakarta Stock Exchange.
- The banks lists on the New York Stock Exchange as ADRs.
- International Finance Corporation, a subsidiary of the World Bank, acquries seven percent stake in Bank Buana.
Despite its commitment to a conservative management strategy, Bank Buana continued to display strong growth at the beginning of the 2000s. By the end of 2003, the bank was able to forecast growth of some 10 percent over the previous year, when its total assets topped IDR 13 billion ($1.5 billion). Although tiny by international standards, Bank Buana, through its commitment to its core trade finance business, could claim a place as one of Indonesia's most respected small banks.
Bank Negara Indonesia Tbk; Bank Central Asia Tbk, PT; Bank Rakyat Indonesia, PT; Unibank, PT; Prima Express Bank; Bank Pacific, PT; Bank Danamon Indonesia Tbk; Bank Artha Grahai.
"Bank Buana Indonesia to List on NYSE," Asia Pulse, December 27, 2002.
"Bank Buana to Go Public," Jakarta Post, June 16, 2000.
"Bank Buana to Issue New Shares," Jakarta Post, August 25, 2003.
"Indonesia's Bank Buana Posts 5.58% Decline in Net Profit," Asia Pulse, October 31, 2003.